India’s diamond sector is passing through a challenging phase, with international orders drying up and processors facing a financial squeeze. Gareth Mostym, chief financial officer of De Beers, tells Rajesh Bhayani in a telephonic interview that the strengthening of dollar has hurt the diamond market, but there are signs of demand picking up. Edited excerpts:
The past few quarters have not been good for the Indian diamond sector. How is De Beers responding to the situation?
Year 2014 was a record year for the diamond sector and for De Beers. However, for the past few quarters the sector has been passing through a tough situation. Demand growth has slowed. Exchange rate movements, due to strengthening of US dollar, have hurt the market as rough diamonds are bought and sold in dollars. Many cutting and polishing centres have faced a real squeeze on their cash flows, too. We responded by reducing production. We have also increased marketing stimulus. Christmas demand from retail consumers will be as good as that in 2014. Inventories with cutting and polishing centres are high, but we see a good opportunity for a pick-up in demand.
India has allowed special notified zone (SNZ) for selling diamonds directly by mines and De Beers has started selling rough diamonds through that window. How do you see that window expanding in future?
We have a broad range of customers in India who had to go to other parts of the world to purchase diamonds. We do, however, have electronic auction platform. But in SNZ, we can show diamonds to them. This is a very positive step.
Does SNZ have the potential to make India a diamond hub?
India has already achieved the status of a diamond hub. SNZ helps the hub become more efficient as customers in India had to travel overseas, which will not be required now.
De Beers has moved selling operations to Botswana. How has that helped?
De beers has been working with the government of Botswana for the past 50 years and the partnership has delivered good value. Botswana has graduated from a low-income country to a middle-income country. The partnership last year contributed a quarter of that country’s GDP or $4 billion. One out of 20 jobs created was the result of the partnership. The partnership is expected to contribute more. We shifted our selling operation to Botswana two years ago. That has created the platform for Botswana from mining, cutting polishing and selling, making it an international diamond hub. That is also attracting investments in supporting businesses.
We are making significant investments in our mining operations in Botswana. The investments run into hundreds of millions of dollars. Among others, these are for increasing the life of mines. We also support projects for small entrepreneurs. This will help the country diversify into other businesses than mining.
India is a major market for De Beers. Have you thought of Botswana-like plans for India?
Our operations in India are completely different from what we do in Botswana. However, India has been a critically important market for us. A vast majority of world diamonds are processed in India and a large number of our customers are Indian. We are investing significantly for promoting our Forevermark brand in India to stimulate demand growth.
If India opens diamond mining, will De Beers consider entering that field in India?
We had in the past explored such possibilities and if there are opportunities, we would certainly consider that. However, at present, there are no such plans.